Smarter Business Weekly Energy Industry Market Review - Desk with graphs

Energy Market Review, Monday 30th July

Headlines for Monday, 30th July

  • Last week bearish movements swept across gas and power contracts, amid resurging wind generation and easing demand as high temperatures persisted.
  • Day-ahead power dropped 2.2% to £56.1/MWh, owing to resurging wind output, lower gas prices, easing demand and a healthy supply margin.
  • Day-ahead gas fell 1.3% to 57.6p/th. Prices gained support at the start of the week as the system was undersupplied amid a series of strikes at Elgin Franklin and Alywn gas fields in the North Sea. However, towards the end of the week prices eased amid an oversupplied system with the return of UCKS production into Bacton SEAL and lower gas-for-power demand.
  • The majority of other power and gas contracts along the forward curve showed small downwards movements.
  • In contrast, EU ETS carbon prices continued to increase, averaging €17.2/t last week. Prices ended 24 July at €17.5/t, a fresh seven-year high. Prices are currently above many predictions made by analysts in Q218, with most expecting EUAs to reach this high at the end of 2018 ahead of the Market Stability Reserve launch in January 2019. Carbon prices have been influenced by increased thermal generation, with depleting hydro stocks during the ongoing heatwave throughout Europe.
  • Brent crude oil gained 1.8% to average $74.0/bl, up from $72.7/bl the previous week.

Brent Crude Oil

Brent crude oil gained 1.8% to average $74.0/bl, up from $72.7/bl the previous week.
Oil prices gained support at the start of last week after news that Iran’s Supreme Leader would back the country’s President, Hassan Rouhani, in blocking the region’s oil exports if the US sanctions go ahead. A warning from members of the G20 saw a downturn in oil prices on 24 July as global leaders highlighted risks to global growth amid ongoing geopolitical tensions.
Prices rose towards the end of the week, gaining support from the US sanctions on Iranian oil. This was despite Turkey, one of the biggest consumers for Iranian crude, announcing they will not comply with sanctions.

API 2 Coal

API 2 coal declined 2.6% to average $86.7/t last week, down from $89.0/t. This was despite an uptick in European demand, notability in Germany, amid lower hydro-stocks. Lower week-on-week imports in India and Japan depressed prices.

EU ETS Carbon

EU ETS carbon prices increased 5.0% to average €17.2/t last week. Prices ended 24 July at €17.47/t, a fresh seven-year high.
Recent prices have been influenced by increased thermal generation, amid depleting hydro stocks during the ongoing heatwave throughout Europe.

NBP Gas

Near-term

Prices for all near-term gas contracts declined last week.
Day-ahead gas fell 1.3% to 57.6p/th.
Prices gained support at the start of the week as the gas system was undersupplied amid a series of strikes at Elgin Franklin and Alywn gas fields in the North Sea, taking 13.0mcm offline until 25 July. However, towards the end of the week prices eased amid an oversupplied system with the return of UCKS production into Bacton SEAL and lower gas-for-power demand.
Month-ahead gas prices lost 1.0% to 57.5p/th. However, prices were 3.8% higher than the same period last month when it was at 55.4p/th.

Seasonal

Seasonal gas contracts showed mixed movements last week and were down 0.8% on average.
Winter 18 gas declined 0.2% to 64.0p/th. Summer 19 and winter 19 increased 0.5% and 0.9% to 59.1p/th and 46.7p/th respectively.

Annual October 18

Annual October 18 gas dropped 0.2% to 57.6p/th, reversing the previous week’s gains.
The contract is 0.9% above its price the same time last month (57.1p/th) and 32.7% higher than the same time last year (43.4p/th.

Baseload Power

Near-term

Most near-term baseload power contracts decreased last week.
Day-ahead power extended upon its losses from the previous week, falling 2.2% week-on-week to £56.1/MWh. Resurging wind output eased power prices across the week, along with easing demand and a healthy supply margin. Easing gas prices also aided bearish movement.
Month-ahead power fell 0.2% to £56.9/MWh, and September 18 power remained relatively unchanged at £59.0/MWh.

Seasonal

Seasonal baseload power prices to summer 19 followed their gas counterparts downwards last week. In contrast, contracts from winter 19 to winter 20 rose.
Winter 18 power lost 0.2% to £62.1/MWh. Summer 19 eased 0.1% to £51.1/MWh.

Annual October 18

The annual October 18 power contract lost 0.2% to £56.6/MWh.
This is £1.1/MWh (2.0%) higher than the same period last month, and an increase of 34.2% from last year when it was £42.2/MWh.